24 April 2007
Trade payments create financial burden for Australian business
The pressure on Australian businesses continues as Trade Payment periods increase to levels close to 26 days above the standard 30 day payment term.
The latest figures in the Dun & Bradstreet Trade Payments Analysis reveal that the average trade payment period in the March quarter across all industries increased by 2.2 days from the December quarter to almost 56 days.
According to Christine Christian, D&B Australasia CEO, the latest results counteract the positive improvements made in the previous quarter.
"The December quarter saw a decrease in trade payment periods which was a positive sign for business, but the results from the March quarter offset any impact that would have flowed through to business owners.
"Businesses are already facing tough conditions, with inflation remaining in the economy and the constant threat of another interest rate rise. The additional burden of cash flow problems created by late business-to-business trade payments will place additional pressure on business and may result in an increase in company insolvencies, particularly in the SME market," said Ms Christian.
Trade payment figures have been at alarmingly high levels since the introduction of the GST in 2000, with businesses averaging 54.5 days to pay accounts over the last seven years. A peak of 63.5 days occurred in 2000 and a low of 48.8 in 2004, with steady increases following since (see graph Yearly Trade Payments Average 2000-2006).
Sector breakdowns show that despite a 2.2 day increase from the December quarter, Agriculture continues to be the most prompt paying industry. The sector has maintained this position for eight consecutive quarters regardless of the detrimental impacts that the drought has had on businesses in the rural sector. While the payment period remains significantly above the standard term at 50.4 days, the sector is 4.1 days quicker to settle accounts than any other industry.
Boom times in mining are not having a positive impact on the sector's payment record, with five consecutive quarters as the slowest paying industry. An increase of 3.6 days since the December quarter, the sector is currently taking double the required period (60.4 days) to pay accounts.
State-based breakdowns across all industries show that payment periods have increased by 2.3 days since the previous quarter.
All states except the ACT increased payment periods, with the Northern Territory having the biggest increase, up 3.6 days from the previous quarter.
NSW is currently the slowest paying state at 57.0 days, while Tasmania is the quickest at 51.3.
According to Ms Christian, businesses, particularly SMEs, need to put pressure on their customers to pay their bills on time and in full or the trend of alarmingly high business-to-business trade payments will continue to negatively impact cash flow and the ongoing viability of Australian businesses.
Australia Trade Payment Analysis.pdf (288KB)
Media notes
For further information and comment please contact:
Danielle Woods,
Hill and Knowlton
Ph: (02) 9286 1258
Christine Christian,
D&B Australia
Ph: (03) 9828 3540
